ITRC Fact Sheet 126Checking Account Fraud

Checking account fraud can be the most difficult type of financial identity theft to resolve. If you are a victim, resolution is not an easy process, but one that you will reach by staying on top of things, keeping highly organized and following the advice below. There are many forms of check fraud including:

Check theft - when the thief uses existing checks stolen from you

Check washing - when a thief takes an existing check and chemically washes the name of the recipient and amount from the check so they can enter new information.

Check synthesizing - your name and address appears on a check for an account that you never opened, perhaps at a bank you don’t use, and in fact, might never have been a real account at all.

NOTE: Each type of check fraud requires a slightly different response from you and has different pitfalls.

Due to the complexities and variations of these five categories, check fraud is probably the most misunderstood type of identity theft crime. It is truly a crime of the computer generation. Anyone with a PC and a printer can create a check. Unfortunately, unlike credit cards, there are no universal programs to date that merchants can subscribe to in order to verify if it is authentic and belongs to the person who is cashing it.

One of the great misconceptions that consumers have is about check scanners. Many people believe that the scanners used in stores connect to a universal system. That is not true. They only tell the clerk if you owe money to that particular store or to the group of stores using the same system.

This lack of a universal check clearance system is the loophole check fraud artists take advantage of when committing this crime. Merchants may not know if the check has been stolen, is part of an account you closed years ago, has been counterfeited or synthesized. Essentially, they are as much a victim of this crime as you are. And if they are a small business, that loss may be very significant.

Checking account fraud can go on for years, until the criminal tires of the game or is caught.

VICTIM RESPONSE TIPS:

These tips are for everyone, no matter what type of case it is.

Organization of your case is important. See ITRC Fact Sheet FS 106 - Organizing Your Case for more information on this topic.

With any check fraud, you should report the crime to the police as soon as it is discovered and get a copy of that report. You will need to send a photocopy of the report, along with a letter or fraud affidavit, to any merchant, collection agency or financial institution where a bad check has been submitted. See ITRC Letter Form LF 126 - Initial Victim of Identity Theft Statement and Fraudulent Checking Account Information Request.

All requests should be made in writing and in a timely manner. All correspondence should be sent “certified mail, return receipt requested.”

Whenever possible, speak with the fraud investigation department and not customer service or bank managers.

Close any compromised financial accounts. When working with the fraud department, ask that a password be placed on the account, especially if the financial institution refuses to close it. This will also help to verify or authenticate you as the holder of the account.

Warrants - It is possible that a criminal warrant will be issued by the local prosecuting attorney for a bad check (if written for more than several hundred dollars). Once you make contact with the merchant or financial institution, ask if they have referred this to the police, the state’s attorney, or the district attorney’s office. If so, request that the merchant or financial institution contact that agency and request they withdraw that warrant. The ITRC recommends you also contact the prosecutor. Find out what documents they need in order to clear the warrant. Make sure you receive a letter stating that the warrant has been withdrawn/cleared, and that your name is not in the warrant system. Your name needs to be cleared from the local level database, state level database and national level database (if placed there). You can call the “Court Clerk” in the county where the check was passed to find out if a warrant exists in your name.

Contact all the check verifications companies listed below. If a check is denied, ask the merchant which Check Verification company they use so you know where to start. You have the right to have erroneous or fraudulent information removed from the report, upon written request and with proof (i.e. a police report or a collaborating letter from a bank, per the Fair Credit Reporting Act).

A federal program, called CHECK 21, has significantly restructured the banking industry.

Checks are now electronically recorded then shredded.

Check 21 creates a paper copy of an electronic image of a check. There are 3 types of checks available to the account holder. It is important to realize that each type of check carries with it different protections.

Image statement, which is copies of your checks each month on a single page, is not suitable for legal dispute purposes.

A simple copy of the check which does not bear evidence of processing, is not suitable for legal dispute purposes.

A substitute check is a photocopy of the electronic image of the check and is considered a legal equivalent to the original check. This copy is required if you want the right to dispute any issue involving that transaction.

IT IS CRITICAL that you carefully review each bank statement when you receive it to monitor for check fraud. Most financial institutions will only accept fraud claims 30-60 days after a statement has been mailed (stated in the notices on the back of each billing statement). Any discrepancies you find should be immediately reported. Discovery of issues beyond the deadline make it more difficult to correct any problems.

Check Theft:

Notify your bank both orally and in writing. Immediately close the related checking account and any connecting financial accounts. Request a Stop Payment be placed on stolen check number/s.

Request for a “re-credit” or refund of the lost funds.

Request your bank flag the check/s as stolen. Your bank should notify the receiving bank to hold the check intact for law enforcement purposes. In other words, ask them to flag it so they can make sure any accepting bank holds onto the check rather than destroying it as they are allowed to do under Check 21.

Get a copy of the check for your file - requesting a substitute check if you cannot get the original.

Make sure you get a Letter of Clearance or confirmation from your bank that the account has been closed and is marked “closed due to theft and not to be reopened.”

Save this letter and send a photocopy of that letter and the police report to any merchant who has accepted a check from the closed account. ITRC Letter Form LF 126 may be used as a cover letter to the merchants, or check verification companies, which may have accepted fraudulent checks written with your information.

Request letters from each merchant once they have declared that you are not responsible for the charges. Keep these in a safe location with other sensitive documents.

Open a new account, adding a strong password so that no alterations can be made to this account such as change of address, adding additional users, etc., without your permission.

Request that your bank notify all check verification companies. Most check verification companies will not take information from consumers.

Pitfalls: Merchants don’t know this account is closed and may accept checks long after you have closed the account. Be patient. They are also victims of this crime.

Check Washing:

Your immediate problem is the one check which has been altered. Notify your bank and have the fraud unit investigate the situation. If the check has not yet been destroyed, then they may be able to find the proof of alteration.

Your second problem is that the thief now has your bank account number. Immediately close the account and follow the directions for Check Theft.

Checking Account Takeover:

Warning signs are:

You don’t receive your bank statement

You receive a notice from the bank about a unknown change

Checks have signatures which are not yours

Withdrawals, bank transfers or deposits you cannot account for

Merchant notification about a bounced check you did not write

Having a check declined by a merchant, and you have not bounced any checks

A letter from a check verification company or a district attorney about a problem

Should you discover you are a victim of account takeover, immediately notify your bank and close the account. Ask questions of the bank (fraud division) to determine how, when and where these modifications were made. Other questions to ask - did they ask for a password or your Social Security Number?

If you believe the perpetrator was someone inside the bank, change banks.

Follow the directions for Check Theft.

Check Counterfeiting:

Warning signs are:

Your statement contains checks you never wrote. It could be a check that follows the number series you use or starts a new number series. These checks could also be check numbers you already used.

You receive a notice from the bank about a fraud issue

Checks have signatures that are not yours

Checks used are a different print or style format than yours

Withdrawals, bank transfers or deposits you cannot account for

Merchant notification about a bounced check that you did not write

Having a check declined by a merchant (you have not bounced any checks)

A letter from a check verification company or collection agency

A letter from a district attorney about a problem

Notification about a warrant for passing bad checks

If these checks are written against your account, close the account. Open a new one and follow the directions for Check Theft.

Check Synthesizing:

Warning signs are:

You receive an inquiry from a bank you don’t use

You receive an IRS income statement from a bank you don’t use

Merchant notification about any check you did not write

Having a check declined by a merchant

A letter from a check verification company or a collection agency

A letter from a district attorney about a problem

Notification about a warrant for bad checks

You can’t close an account that doesn’t exist. You can’t notify every bank in the country. However, request that your bank notify the check verification companies about this problem.

Request that any fake checks be held intact and provided to law enforcement.

Again, write each merchant ITRC Letter Form LF 126 and explain the situation, including the fact that there have been X number of checks written so far and that all have been reported to the police.

Remember to update law enforcement as new checks are discovered and obtained.

REDUCING YOUR RISK OF CHECK THEFT/FRAUD:

You can reduce your potential risk of being a victim of this crime by practicing a few safety tips:

Always receive mail in a locked mailbox. Go to the post office to send mail that contains a check.

Cross-cut shred all unused or old checks prior to disposal.

Use credit cards when possible. Don’t carry your checkbook or deposit slips, unless necessary. Keep them in a secure, locked place in your home.

Only use checks with merchants you know and trust. Remember anyone receiving your check has access to the checking account information.

Monitor your account statements closely. If you find an error, report it immediately to your bank both orally and in writing. Make any requests for re-credits in writing.

Add strong passwords to all credit and bank accounts.

When creating PIN numbers, do not use a number easily associated with you such as your birthdate or anniversary.

Never have your Social Security Number or Driver’s License number printed on checks. You might want to consider using just your first initial and last name imprinted instead of your full name. If you use a PO Box, use that on the check instead of your home address.

You may place a freeze on your consumer reports. This freeze is similar to the one you can place on your credit reports with the three credit reporting agencies. You must contact each consumer reporting agency if you wish to place the freeze with all of them. Each State has it’s own statutes for freezeing. Read all about it at www.consumerdebit.com

Credit Reports:

Should you fear that the thief has your Social Security Number, contact the three Credit Reporting Agencies - put a fraud alert on your report and order your free report to which you are entitled as a victim of identity theft.

This fact sheet should not be used in lieu of legal advice. Any requests to reproduce this material, other than by individual victims for their own use, should be directed to This email address is being protected from spambots. You need JavaScript enabled to view it..

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